Dow Hits 16,000: Why So High? (VIDEO)

NEW YORK, NY – The Dow Jones industrial average has closed above 16,000 for the first time ever. This marks yet another milestone for a stock rally that has surprised even some of the raging bulls of Wall Street. But why is it so high?

The Dow added 109 points.  Investors were heartened by a better-than-expected drop in first-time jobless claims and a Senate panel’s vote advancing Janet Yellen‘s nomination to be the next head of the Federal Reserve. [contextly_sidebar id=”141028c7727346458af88ded1c0b4168″]

Investors have been pouring more money into U.S. stock mutual funds than they have in 13 years. The may be attracted by a market near record highs and alternatively feeling stung by bond losses which might worsen if interest rates keep rising. Investors are moving further out the risk curve and it’s manifesting on the equity side.

The Federal Reserve appears to be committed to quantitative easing indefinitely, despite their rhetoric about tapering. Markets ideally should be directed by the fundamental, natural law of supply and demand. If the fed does taper the $85 billion monthly bond buy, stock markets would likely shrug. The bond markets would be a different story however.

The gap between stock and bond returns is widening. The Barclays Aggregate, a common bond-fund benchmark, declined 1.4% through yesterday, headed toward its first loss since 1999.  People seem to realize that if they want their money to grow, they have to be willing to take on more risk.


IMG_1514Bio: Heather Hughes is an institutional financial sales executive as well as a lover of liberty and the free market. She is a weekly contributor to The Libertarian Republic and an expert on money and the marketplace.

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